When Kilauea volcano on Hawaii’s Big Island spewed lava into the Leilani Estates neighborhood this month, many residents were left wondering whether damage to their property would be covered by insurance.
The sad reality is that losses associated with lava or volcanic activity are excluded from many policies. Homeowners need to buy specific comprehensive plans to get added protection for damage due to volcanic activity. These expensive plans can cost thousands of dollars each year. And lava coverage is just one example of a specialized financial product that may not be necessary for most but could prove itself extremely valuable to others.
[Read: Your Insurance Guide to Storms.]
Read on for more surprising insurance and financial products that can help keep your finances safe and out of harm’s way.
1. Lava Insurance. Those living in an affected area need to have a comprehensive homeowner plan that doesn’t exclude lava damage. The only drawback: Those policies can cost more than $3,000 a year, according to one Hawaiian insurance agent. Moa Insurance Services Hawai’i is one example of a company that specializes in helping residents find these comprehensive plans.
2. Ride-Share Insurance. Rob Kaelin, regional president Midwest/West for CBIZ Risk Management & Insurance Services Inc., says Uber and Lyft drivers shouldn’t assume they are covered by their car insurance or their ride-share company.
“Ride-share companies typically only offer protection if an accident occurs when a guest is in the vehicle,” he says. Meanwhile, a traditional car insurance policy might not cover accidents that occur while a driver is on the clock but doesn’t have a passenger in the car.
To cover this gap, some car insurers offer ride-share coverage that can be added to an existing policy. According to State Farm, this coverage will add 15 to 20 percent to the premium price.
3. Wedding Insurance. Couples getting ready to say “I do” can buy wedding insurance in case anything goes wrong on the big day. These policies often include two components: liability and cancellation coverage. The former will pay for injuries to a guest or damage to a venue, while the latter will let a couple recoup costs if they have to postpone the event or if a venue or provider goes out of business and takes their deposit with them.
“The more you have invested in a wedding day, the more wedding insurance might make sense,” says Amy Danise, spokesperson for insurance marketplace EverQuote. She says a basic policy can be purchased for less than $200.
However, couples need to read the fine print carefully, especially when it comes to cancellations. For example, most policies won’t pay for cancellations due to rain. “It’s a bummer, but it isn’t going to qualify,” Danise says. Instead, a policy may require more extreme weather to justify a cancellation.
4. Kidnap and Ransom Insurance. While travel insurance is common, you might want to consider taking out this more unusual policy, depending on where you’re traveling. “Kidnap and ransom [insurance] is a particularly important coverage for people who may be traveling on business or pleasure to riskier parts of the world,” says Annmarie Camp, executive vice president at Chubb Personal Risk Services, an insurer.
Countries such as Mexico, Libya and Venezuela have been identified as kidnapping hot spots by risk management firm Red24, and businesses may take out insurance policies for employees working in these areas. Policies may exclude coverage if a kidnapping occurs in a country where the U.S. has issued sanctions, such as Syria or Iran. The cost of kidnap and ransom policies can be highly variable depending on coverage needs, but premiums may start as low as $500. Companies like Travelers Insurance offer these plans.
[See: 9 Ways to Reduce Your Insurance Costs.]
5. Gap Insurance. Those financing a car may want gap insurance. This coverage will pay the difference between what a vehicle is worth and what you owe should the car be totaled. For example, if you owe $10,000 on a car that your insurance company says is worth only $7,500, gap insurance will provide the additional $2,500 needed to pay off the loan.
Dealerships may offer gap insurance when selling a car, but Danise says to be wary of these offers. Many will roll the premium — often $500 to $1,000 — into the financing, which means you’ll be paying interest on the cost of insurance. It might be cheaper to see if you can buy gap insurance directly from your auto insurer instead.
6. Art and Antique Insurance. Don’t assume your homeowner coverage will pay for damaged or stolen fine art. “Yes, most people have some level of property and liability coverage when they are purchasing homeowners insurance or renters insurance,” Camp says. However, it may have limits that mean valuable, one-of-a-kind items are not fully protected.
If you have a single item, adding a rider to an existing property policy may be sufficient. But if you plan to collect pieces, a separate art and antique insurance policy can provide more comprehensive coverage. Depending on the value of a collection, art and antique insurance can run from hundreds to thousands of dollars per year.
7. Rental Insurance. A typical homeowner policy won’t pay for damages if you rent your house through home-rental companies like Airbnb or VRBO. “People who rent out their properties may find themselves liable if a guest gets injured if he or she borrows an offered bicycle,” Kaelin says.
Some companies, like Airbnb, offer host protection insurance to pay for these types of liability claims. This insurance is free to those who use the site. However, you can also buy home-share coverage directly from insurers for a minimal cost. For instance, a plan through Progressive starts at $8 a night.
8. I Bonds. Government bonds can sometimes get a bad rap as a poor investment. However, Davey Quinn, vice president of investments for online advisory firm United Income, says they can be a good choice for some people. Series I Bonds currently earn 2.52 percent interest, a rate that far exceeds savings accounts and even most certificates of deposit. The interest includes a fixed-rate component as well as an inflation rate. “It’s not a bad way to hedge against inflation,” Quinn says. Plus, I Bonds can be purchased for as little as $25 and can be redeemed after 12 months. They don’t carry the risk of bond mutual funds, and interest is exempt from state and local taxes.
Though not the right vehicle for large, long-term savings, Quinn says the bonds are a good place to park money that will be needed within a few years. For example, money that would otherwise be left in a savings account in anticipation of a car purchase or vacation may be better off invested in these bonds.
9. Low-Volatility Equities. Low-volatility equities are financial products that can prove valuable to some investors. Often available as exchange-traded funds, or ETFs, they are designed to help capture market gains but minimize losses in a down market.
“If you’re really young and volatility doesn’t really scare you, you may not need to diversify,” Quinn says. However, other investors may want to talk to their financial planners about whether a low-volatility strategy is right for them.
10. Deferred Annuities. Deferred annuities are another financial product often overlooked, Quinn says. These products allow people to put aside money in a savings vehicle that will make guaranteed payments later on. The rate of return on deferred annuities may be only 2 to 3 percent, which is lower than what might be available through other investments, but the opportunity to have guaranteed income for life makes this an attractive product.
[See: 7 Important Things to Understand About Annuities.]
According to Quinn, deferred annuities are best for those who are healthy and believe they may outlive their savings. Still, it’s best to consult a financial planner to see if you would benefit from the purchase of an annuity.
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Lava Insurance and Other Unusual Financial Products You Might Need originally appeared on usnews.com
